BUSINESS ADMINISTRATION
FINANCIAL ACCOUNTING
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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The purchase of a truck for $15, 000 cash
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An asset with a cost of $15, 000 was destroyed by fire
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Repayment of a $15, 000 bank loan
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Collection of $15, 000 in accounts receivable
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Detailed explanation-1: -(ii) Decrease in Liability, decrease in Asset: Transaction of payment to a creditor decreases liability (creditor) and also reduces asset (cash or bank).or Loan from bank repaid decreases the asset (Cash/Bank) and decrease the liability (Loan from Bank) simultaneously.
Detailed explanation-2: -The payment of a liability decreases assets and liabilities. Explanation: The payment of a liability decreases assets and liabilities as the liability could be paid only through paying cash or cash equivalents hence it decreases the asset when liability is paid off then it is decreased.
Detailed explanation-3: -3) Redemption of debenture-Debenture (liability) and cash(assets) decreases.
Detailed explanation-4: -The payment for advertising expenses in cash increases the company’s expenses and decreases the cash account. Expense decreases equity. Thus, both assets and equity decrease in this transaction.